Win some, lose some. Last week International Business Machines Corp. (NYSE:IBM) scored a major cloud win after bagging California’s launch of CalCloud, an infrastructure as a service private cloud rolled out across the state. California’s government entities can use CalCloud which has been “designed to allow around the clock access to a shared pool of easily configurable resources including compute, storage, network and disaster recovery services.”
The win should have been sweet consolation for International Business Machines Corp. (NYSE:IBM), which lost out last year on the CIA’s plum $600 million trophy contract to bête noire Amazon Web Services (AWS), the cloud service offered by Amazon.com, Inc. (NASDAQ:AMZN).
More important, the episodes show the rapid acceptance and growing size of cloud projects, even from the government sector.
Gartner’s Magic Quadrant and IBM
Though International Business Machines Corp.(NYSE:IBM) has been positively mentioned in Gartner’s Magic Quadrant, a highly regarded survey of the cloud industry, it is no secret that AWS is miles ahead of the competition – it is said to have a mind-boggling 83% share of the cloud infrastructure.
It is no surprise then that International Business Machines Corp. (NYSE:IBM) is investing $1.2 billion in a necklace of data centers that will straddle 40 locations in 15 countries across the globe, as it races to close the gap with AWS.
According to their industry update on Enterprise Hardware/Software & Hard Disk Drives Industry Update dated July 30, Stifel analysts Aaron C Rakers, Joseph Quatrochi and Andrew Shinn reveal that IBM’s data centres in Toronto and Melbourne will be online in the next 30 days, while data centres located in Paris, Montréal, Frankfurt, Sydney, and Tokyo plan to come online in 2H2014.
Industry growth
“Our tracking of cloud / internet capex spending thus far reported [Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), eBay Inc (NASDAQ:EBAY), & Baidu Inc (ADR) (NASDAQ:BIDU); combined equating to +80% of the total cloud / internet-related capex figures we have tracked since 2007] indicates a 24% yr/yr increase in 2Q14 (trailing 12-month spend +54% yr/yr),” observe the Stifel analysts, indicating the opportunity available to WDC and SMCI.
In another statistic of the rapid growth in the cloud industry the analysts reveal that IBM generated $ 4.4 billion in cloud revenue during 2013, and in the first half of 2014 its revenue increased to over 50% on a year-on-year basis.
“IBM estimates that nearly 70% of enterprises will pursue hybrid clouds are 2015, while 91% of net new software built is targeted for cloud in 2014,” say the analysts.
Implications for Western Digital Corp and Super Micro Computer, Inc
The developments in cloud computing give rise to expectations that there could be a revival in the market for high capacity HDDs, affecting Western Digital Corp(NASDAQ:WDC) positively.
In yesterday’s conference call, Stephen D. Milligan – Chief Executive Officer, President, Director and Chairman of Executive Committee of Western Digital Corp(NASDAQ:WDC) clarified that demand trends from Cloud customers were improving going into the second half of the year.
Also benefiting would be Super Micro Computer, Inc. (NASDAQ:SMCI) which develops and provides end-to-end green computing solutions for Enterprise IT, Datacenter, Cloud Computing, High Performance Computing (HPC), and Embedded Systems globally.
Supermicro is a vendor of choice for IBM’s SoftLayer cloud offering.
